One of the real-world consequences of the lack of timely debt discharges for the scammed students of the for-profit Corinthian Colleges, Inc has been the situation of Pam Hunt of Ledyard CT.
Ms. Hunt is buried in debt from the now-defunct Corinthian. The school was sued by the Consumer Financial Protection Bureau, multiple state Attorneys General, and other regulations. 13 Senators (including Elizabeth Warren) have called for all the debt to be forgiven, as have 9 state attorneys general. But the Department of Education is still dragging their feet.
As a result, Ms. Hunt has been unable to secure a mortgage to buy the house she rented. She wanted to purchase it after her landlord walked away from the property, and it went into foreclosure. But loan officers have told her that would have given her a mortgage, if not for her high level of student debt from Corinthian. Ms. Hunt’s story is just one example of the human consequences of the ongoing delay in Corinthian debt cancellation.
Ms. Hunt’s situation was recently profiled by Al Jazeera America News Daily:
The Debt Collective has put out a call to ask Altisource (who is the vendor of servicer Ocwen) and U.S. Bank to rent to Pam, rather than evicther family, including her wheelchair-bound son.
If you’d like to help, please share this image, or RT Strike Debt’s tweet.
An auto dealer charging someone more for a car loan, simply because they’re black or Latino? It’s illegal under federal law. Yet it keeps happening. And 13 Democrats in the House of Representatives voted to block measures aimed at countering this kind of discrimination.
Research has shown that many auto dealers charged black and hispanic borrowers more, giving them higher markups than similarly situated white consumers. In response, the Consumer Financial Protection Bureau (CFPB) issued guidance in 2013 to auto dealers. The guidance outlined how they could better comply with the Equal Credit Opportunity Act (this act makes it illegal for a creditor to discriminate against a borrower based on race, religion, etc). In other words, they told them how best to stop discriminating.
Seems like a good idea that everyone should be behind, right? Wrong!
Why did they do this? It’s most likely because auto dealers are a particularly powerful political group. Most members of Congress have auto dealers in their district, and will go to great lengths to address their concerns, even if there concerns are “don’t pay attention to my lending practices!”
This is a messaging bill that is meant to have a chilling affect at the CFPB, and discourage them from going hard on auto dealers who discriminate against black and Latino borrowers. But what’s really a shame, is that 13 Democrats are willing to stick their necks out for auto dealers, but not for the customers they’re ripping off with higher rates.
If your Representative is among the 13 who voted for this bill, it’s worth letting them know your opposition:
Reps. Terri A. Sewell (D-AL, whose district includes Selma), Brad Sherman (D-CA), Rubén Hinojosa (D-TX), David Scott (D-GA), Ed Perlmutter (D-CO), Bill Foster (D-IL), Daniel T. Kildee (D-MI), Patrick Murphy (D-FL), John K. Delaney (D-MD), Kyrsten Sinema (D-AZ), Joyce Beatty (D-OH), Denny Heck (D-WA), and Juan Vargas (D-CA).
One need only look at recent headlines to see that bigotry is alive and well in the United States. Black college students are as likely to get hired as white high school drop-outs. Women are still paid less than men, even when their performance is equal or better. And the vast majority of people incarcerated for drug crimes are people of color, even though blacks and whites use drugs at roughly the same rate. But according to former Republican Senator from Texas Phil Gramm, the United States has already beaten bigotry, with one exception. “The one form of bigotry that is still allowed in this country,” according to Gramm, “is bigotry against the successful.”
Gramm’s comments came in a House Financial Services Committee hearing on Tuesday. The hearing was meant to evaluate the Wall Street Reform and Consumer Protection Act, or Dodd-Frank for short, which passed in 2010. In the hearing, Gramm was asked a leading question by Rep. Bill Huizenga about the CEO pay ratio rule, a rule that would require publicly traded companies to disclose the ratio of their CEO’s pay to that of their median worker’s pay. In an answer that ran over the allotted time, he pointed to this rule proposed as evidence of “political demagoguery” and railed against the victimization of the wealthy in America:
He also quoted his “friend” Ed Whitacre, former Chairman and CEO at AT&T, who received a $158 million pay package when he retired in 2007. Gramm said of Whitacre: ‘If there’s ever been an exploited worker…he was exploited! It was an outrage!”:
It’s worth noting that former Senator Gramm had a very significant role in the financial crisis. He and his wife Dr. Wendy Gramm, who was an Enron board member at the time, helped pass the Commodity Futures Modernization Act (CFMA). The CFMA exempted some of the riskiest kinds of derivatives from any sort of regulation, and included what came to be known as “the Enron loophole,” an exemption that President Obama blamed for allowing speculators to drive up the price of fuel. After he left the Hill in 2002, Gramm went to work for Swiss bank UBS as a lobbyist, and as of 2012 still consulted for the firm.
Senator Gramm was also responsible for the Gramm-Leach-Bliley Act, which put the final nail in the coffin of Glass-Steagall, a Depression-era law that separated boring, commercial banking from the more casino-style investment banking.
Barry Ritholtz predicted in Bloomberg that Gramm would be unapologetic about his role in the financial crisis. What neither Ritholtz nor I realized was that, in addition to being unapologetic, Gramm would be so absolutely and completely tone-deaf.
What’s a government agency to do when a major source of profits for two big banks is at risk? Why, just try and make the problem go away for them, of course!
Mortgages are still big business to the nation’s biggest banks. And most banks rely on the government to help in case things go wrong, through insurance that reimburses banks if the home is foreclosed on.
The government form banks must fill out in order to get this insurance used to have a checkbox on it, where banks certify they haven’t been convicted of a crime for the last three years. So, right before six major Wall Street banks pled guilty to FX rigging in May, the government agency in charge of this form, the Department of Housing and Urban Development (HUD)…just changed the form!
Five days after HUD proposed dropping the provision, news broke that six different gigantic Wall Street companies that had conspired to rig foreign currency exchange markets were pleading guilty to criminal fraud charges. If HUD’s proposed changes go through, all six firms would suddenly regain unfettered access to taxpayer-backed mortgage insurance. Two of them — JP Morgan and Citigroup — currently hold a combined $2 billion in mortgage loans insured by the Federal Housing Administration.
Luckily, three lawmakers noticed the change: Rep Maxine Waters and Senators Sherrod Brown and Elizabeth Warren, and wrote a letter calling out HUD for trying to sneak this change through, and erase any consequences for the banks’ criminal guilty plea.
Not only did HUD propose taking away the checkbox regarding past criminal convictions, they tried to sneak the change past the public. In the notice HUD is required to file to tell the public about any changes, they didn’t even MENTION that the checkbox was going away!
“HUD may have good reasons for proposing these changes at this time,” write Brown, Warren and Waters, but “its Federal Register notice fails to even describe the changes to the certifications on illegal conduct — let alone offer a rationale for them.”
HUD could have used this opportunity to create real, immediate penalties for the banks After all, as Pyke reported in Think Progress, “JP Morgan and Citigroup — currently hold a combined $2 billion in mortgage loans insured by the Federal Housing Administration.” Can you imagine the deterrent effect it would’ve had, if HUD had denied future FHA insurance of these banks, due to their recent guilty pleas?
Instead, it’s just yet another entry in a long series of regulators burying Wall Street’s bodies for them, and helping them avoid any consequences for bad behavior.
What’s a bigoted Republican to do when the GOP campaign arm funds openly gay candidates? If you’re Rep Scott Garrett, the answer is simple: don’t pay your dues in protest.
We’ve long written about the ways Republican Rep. Scott Garrett of New Jersey works to enshrine racist policies into law. He’s made it his personal mission to try and ensure racial discrimination in housing goes un-prosecuted. But his prejudice doesn’t stop there. It seems Rep. Garrett also wants to be sure that not a penny of his money goes to back gay Republican candidates.
Jake Sherman and Anna Palmer broke the story in Politico. Rep. Garrett told a caucus of Republican members why he’d refused to pay his dues to the National Republican Congressional Committee:
“He had not supported the NRCC in the past, he said, because it actively recruited gay candidates and supported homosexuals in primaries.”
It turns out Rep. Garrett has found a work-around that allows him to keep his money out of the hands of gay Republican candidates. According to Politico:
“Garrett, according to source with knowledge of the situation, has cut a deal of sorts. He has agreed to donate to the NRCC’s building fund and recount efforts, but not to the committee directly. Garrett’s office did not respond to requests for comment. The NRCC’s policy is that it does not discriminate based on sexual orientation.”
Rep. Scott Garrett: representing New Jersey’s 5th district with racist public policy and homophobic attitudes since 2003!
Today, in a huge blow to bigots everywhere, the Supreme Court decide to PRESERVE key protections against racial and other discrimination in housing.
What was at stake is the ability for the government to prosecute violations of the Fair Housing Act by using “disparate impact” theory, which you should just think of as, well, statistics and math.
Disparate impact theory holds that you can prosecute someone for discrimination if two things happen:
Minorities, or other protected classes, who were similarly situated to whites, were
disproportionately affected by a policy.
There was an
alternative method that could have used that wouldn’t have been as discriminatory,
that wasn’t used.
If both of those standards are met, the government can prosecute for, say, violations of the Fair Housing Act (aka, discrimination in housing).
Here’s what this looks like in practice: The Justice Department used
disparate impact when they sued Wells Fargo for housing discrimination.
They looked at borrowers with the same income levels and credit scores, and found that Black and Hispanic borrowers got more expensive mortgages than whites.
The basic idea is outcomes vs intention. As it stands now, it’s enough to show discrimination because their were racist outcomes–AND alternatives existed that wouldn’t have created racist outcomes, but were ignored. Banks want outcomes to be ignored when it comes to proving housing discrimination. They think they should only be prosecuted for discrimination if there is a smoking gun email proving that they intended to discriminate.
Conservatives, and their big-bank allies, have been obsessed for years with preventing disparate impact from being used. As I’ve written about previously, Rep. Scott Garrett has made it his personal mission to try and ensure racial discrimination in housing goes un-prosecuted. This January, it seems they finally had their best chance, with the case Texas Department of Housing and Community Affairs v.
The Inclusive Communities Project.
To deviate from finance for just a moment, last night I had the pleasure of joining “Realtime with Bill Maher.”
We discussed the hyper-aggressive policing of black children at a pool party in McKinney Texas, and I spoke about white supremacy in America. This, of course, made some conservatives at Brietbart.com pretty upset (they really ought to read Robin DiAngelo’s fantastic paper, “White Fragility,” and at least learn a bit of the history of racist government policy, like the redlining of blach neighborhoods that led to the kinds of predatory subprime housing markets Ta-Nehisis Coates wrote about in the “Case for Reparations”). Here’s the clip from Mediaite:
Then on Overtime, I got to briefly discuss the amazing work of the Debt Collective, and why we’re focusing our organizing on creating unions of debtors:
Today, the Department of Education decided against doing its job.
Instead of providing broad debt cancellation to former students of Corinthian Colleges, Inc, the Department decided to require students to jump through extensive loopholes in order to apply for relief.
But instead of using the vast evidence accumulated by multiple state Attorneys General and federal regulators alike that Corinthian defrauded students, the Department of Education is asking that harmed students re-prove they were injured.
The list of documents students are told to produce to apply for debt cancellation is exhaustive, and an incredibly high barrier to meet:
It includes citations of “state & applicable law or cause of action” – most borrowers aren’t lawyers, and they aren’t going to know what to list.
It also asks for "transcripts and registration documents indicating your specific program of study and dates of enrollment" – how will students obtain copies of these documents, given that the school is now bankrupt?
What’s perhaps even worse, is that the Department is creating fertile ground for scam artists to thrive. Even before today’s announcement, websites had been cropping up touting to offer “loan forgiveness” or “closed school discharges,” for a fee, despite the fact that these are all options available for free.
By choosing to force all students through an individualized process, the Department is empowering scammers to prey on already-harmed students.
The process the Department will be routing most students into in order to request relief–called “defense to repayment”–has existed for years; it’s hardly worth fanfare and a big announcement. And as Shahien Nasiripour noted in the Huffington Post, the Department improperly denied many borrowers their debt cancellation in the past. So how can we trust the Department to provide debt cancellation, when they have a track record of denying owed relief to scammed students?
In addition: the Department is trying to give itself credit for providing easy relief to a group of Heald students – but only some Heald students are eligible. Here is the list of Heald students from 2010-2015 who are eligible for debt discharges simply by filling out an attestation form. (Note: this attestation form is currently broken in both web browsers and smart phones. It appears only to work in the desktop version of Adobe Acrobat. This is a huge problem because 7% of Americans only have internet access thru smartphones).
While the Department is trying hard to pat itself on the back for helping many Heald students, the only reason Heald schools weren’t sold to ECMC – in a deal brokered by the Department itself – is because California Attorney General Kamala Harris refused to give any potential buyer of California Corinthian schools a pass on her 2013 lawsuit, by refusing to waive successor liability. Any relief that Heald students will get by signing that attestation is thanks to AG Harris, not the Department.
What’s most insulting about today’s announcement, is that students at Wyotech and Everest were victims of the same “misrepresented job placement rates,” as evidenced by numerous lawsuits and investigations by state Attorneys General and the Consumer Financial Protection Bureau. Why are Everest and Wyotech students not also eligible to use this attestation form?
I wrote previously that it was quite possible that even though Corinthian got bailed out, its students were going to get sold out. Today, those fears were realized, as the Department of Education seems to have reverse-engineered this process to make it as difficult as possible for harmed Corinthian borrowers to actually see relief.
Here are a list of other questions I have regarding today’s announcement:
1. The factsheet states that “all former Corinthian students who apply for borrower defense have the option” of forbearance or a freeze on debt collection, if they are already in default. Why isn’t the Department automatically providing forbearance, or a freeze to debt collection, for *all* Corinthian students? Why punish those students who are not aware of the defense to repayment option?
2. What is the appeals process, if a defense to repayment application is denied?
3. How will the Department be advertising defense to repayment? What kinds of ads will they be placing, and where, to ensure that borrowers know about their options?
4. How will the Department help students to obtain the documents required to submit the defense to repayment forms, including “transcripts and registration documents indicating your specific program of study and dates of enrollment” given that Corinthian has filed for bankruptcy protection? Where can students go to request copies of the needed documentation?
5. What happens if a student applies for defense to repayment, but the servicer does not freeze collection or give the student the Department-promised forbearance?
6. Can state Attorneys General petition on behalf of their borrowers to establish additional classes? (Massachusetts AG Maura Healy seems to think so).
7. Will the public be able to weigh in on the choice of the “special master,” who according to Ted Mitchell in a press conference (see transcript here) would be chosen three weeks following this announcement?
Rep. Ann Wagner has picked an unusual hill to die on.
The Department of Labor plans to write new rules to reduce the conflicts-of-interest that some of America’s retirement advisors have. Conflicts like the kickbacks some receive–sometimes in the form of diamond-encrusted rings–when they steer their clients into particular products.
Currently, kickbacks that incentivize bad advice can cost Americans saving for retirement $17 billion a year, according to estimates from the White House.
But Rep. Ann Wagner doesn’t care about the $17 billion American retirement savers are losing. Rep. Wagner cares about the lost profits that WALL STREET may face, should these conflicts-of-interests be lessened, and these kickbacks prevented.
Now, Rep. Wagner has taken it even further, threatening to defund the Department of Labor if they dare cut into Wall Street’s profit margins with new proposed rules. Jim Gallagher of the St. Louis Post-Dispatch reports:
U.S. Rep. Ann Wagner, R-Ballwin, says she is “at war with the Department of Labor” and she is threatening to cut off funding for enforcement of its proposed “fiduciary rule” for financial advisers.
Wagner drew cheers from a crowd of 800 insurance brokers and executives near Washington, D.C., on Wednesday as she vowed to fight the planned rule.
“If push comes to shove … by god, we’ll just defund them,” she said, as quoted by the Investment News trade journal.
If you live in Missouri’s 2nd District, you should know that your Representative is willing to go to any lengths to make sure Wall Street keeps its profits big…at YOUR expense.
In my latest for Medium.com’s “Bull Market,” I write about the Consumer Financial Protection Bureau’s call to everyone with student debt to write and tell them about their road blocks and horror stories:
“There is no shortage of student loan horror stories. Servicers were found to have deliberately maximized late fees, and over-charge borrowers who were in income-based repayment plans. Sallie Mae was reported to have hounded family members for huge sums of money following the death of a loan’s co-signer. And Navient was sued by the Department of Justice for systematically overcharged members of the military.
In an attempt to improve the service student loan borrowers receive — and hopefully avoid abuses going forward — the CFPB is asking the public to weigh in on their experiences.”
